Stable Matching with Network Externalities

We study the stable roommates problem in networks where players are embedded in a social context and may incorporate positive externalities into their decisions. Each player is a node in a social network and strives to form a good match with a neighboring player. We consider the existence, computation, and inefficiency of stable matchings from which no pair of players wants to deviate. We characterize prices of anarchy and stability, which capture the ratio of the total profit in the optimum matching over the total profit of the worst and best stable matching, respectively. When the benefit from a match (which we model by associating a reward with each edge) is the same for both players, we show that externalities can significantly improve the price of stability, while the price of anarchy remains unaffected. Furthermore, a good stable matching achieving the bound on the price of stability can be obtained in polynomial time. We extend these results to more general matching rewards, when players matched to each other may receive different benefits from the match. For this more general case, we show that network externalities (i.e., “caring about your friends”) can make an even larger difference and greatly reduce the price of anarchy. We show a variety of existence results and present upper and lower bounds on the prices of anarchy and stability for various structures of matching benefits. All our results on stable matchings immediately extend to the more general case of fractional stable matchings.